Many feel that Greece's fate, including its continued membership
of the eurozone, rests in the hands of the Troika - officials
from the European Commission, European Central Bank and the
International Monetary Fund charged with evaluating Greek's
reform efforts, its financing needs and how they should be met.
But this is not the entire story by any means.

The country's fate is also closely
linked to what happens in Italy and Spain, and in a manner that
is yet to be sufficiently understood by many. (Read
More: Can Spain Avoid
Greece’s Vicious Circle?)

Domestic political stability and
economic reforms are clearly critical for Greece's continued
membership of the eurozone. Many are thus interested in how the
Troika, acting on behalf of official creditors, will react to the
government's request to stretch out the budgetary adjustment over
an extra couple of years.

Will they agree? If they do, how will
the accompanied structural reforms be tweaked? And who will pony
up the additional financing, either explicitly or through
indirect methods (such as the refinancing undertaken recently by
the ECB (Learn
more)?

Important as they are, these questions
are just part of the required analysis. You see, Greece's triple
problem - of way too little growth, much too much debt, and a
political elite that has lost popular credibility and legitimacy
- cannot be solved by adding a couple of years to the adjustment
program and finding a bit more money.

A sustainable solution requires a major
reset of the country's parameters - economic, financial
political, and social.

Domestic conditions are of course key
here. Without common vision and a sense of shared responsibility
- both of which are lacking in Greece today - it is virtually
impossible for the country to regain its employment engines,
realign its cost and revenue structure, and regain Eurocentric
and global competitiveness.

Yet it is not all about internal challenges. Greece's continued
membership of the Eurozone depends also on the evolution of the
situation in Italy and Spain - two countries that will have an
important impact on what the Greek reset looks like and when it
would occur.

Any relaxation in policy conditionality
would be viewed by the Troika as giving the wrong signal to other
vulnerable Eurozone members. And creditors would be even more
reluctant to pour good money after bad.

With the social fabric of Greek society
already highly stressed, the government there would find it even
more difficult, if not impossible, to implement an approach that
promises the population greater austerity and pain. A disorderly
exit (or "Grexit") from the eurozone would only be a matter of
time. To make things worse, it is likely that this would occur in
the context of an increasingly unstable Eurozone.

What if collective European efforts were
to succeed in stabilizing Italy and Spain? You may think that
this would be unambiguously good for Greece as a more robust
Eurozone would be more willing to support its weakest member. But
it is not that simple.

The stronger the eurozone firewalls
protecting Italy and Spain, the greater the inclination for some
European officials to de facto push Greece out.

This is not just about the difficulties
that Greece faces to deliver on its policy commitments, regain
competitiveness and create jobs within the confine of the single
currency. It also goes beyond the realization that Greece would
require another major debt restructuring which, this time around,
would likely involve money owed to official creditors.

There are several member countries that believe that Greece never
belonged in the Eurozone to begin with. Moreover, its membership
was enabled only by questionable numbers.

Up to now, their desire to create
conditions that would accelerate a Grexit has been held back by
the fear that this would significantly disrupt other peripheral
economies - something that strong eurozone firewalls would
overcome.

Greece's future thus depends on the
outcome of both domestic events and developments in Italy and
Spain. Greek officials should certainly hope that collective
European action will succeed in stabilizing these other two
countries' economies. But they should also realize that too great
a success could, ironically, map into a higher probability of a
Grexit.

It could well be that continued muddle
through for the eurozone as a whole, rather than full resolution
or fragmentation, is what would deliver the most official support
for Greece. This may be attractive for the current Greek
government. It certainly won't be for the rest of the eurozone.